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Court withdraws ruling in BP insurance dispute

Updated at: 08/29/2013 4:35 PM
By MICHAEL KUNZELMAN

(AP) NEW ORLEANS - A federal appeals court reversed course Thursday on its earlier ruling favoring BP in a multimillion-dollar insurance dispute, handing at least a temporary setback to the energy giant as it seeks to defray some of the enormous costs associated with the huge 2010 Gulf oil spill.

BP has argued that it is entitled to a portion of $750 million in coverage from a drilling contractor’s insurance policies to help the London-based multinational help pay pollution-related costs following the explosion, fire and spill in the Gulf of Mexico.

BP leased the drilling rig that exploded from Transocean Ltd. and required by contract that the Swiss-based drilling company maintain minimum insurance coverage for BP’s benefit. Transocean’s policy with Ranger Insurance Ltd. provided at least $50 million in coverage, while its policies with several "excess liability" insurers added at least another $700 million in coverage.

BP contends it is entitled to coverage under those Transocean policies as an "additional insured" party, but U.S. District Judge Carl Barbier rejected the company’s interpretation of the policy language in a November 2010 ruling. Then the 5th U.S. Circuit Court of Appeals in New Orleans reversed Barbier’s ruling on March 1 in a decision favoring BP.

On Thursday, a three-judge panel of the same New Orleans based appeals court said the outcome of the dispute isn’t clear and it would seek answers from the Texas Supreme Court to two questions that could help the federal appeals court ultimately decide the case. For now, Barbier’s ruling against BP stands.

"We continue to believe that the 5th Circuit got it right in its previous unanimous opinion and think that result will be confirmed," BP spokesman Geoff Morrell said in a statement Thursday.

The explosion on the Deepwater Horizon triggered an explosion that killed 11 workers and left millions of gallons of oil spewing into the Gulf, a disaster that already has cost BP billions of dollars in cleanup expenses and other costs. The insurance dispute is one of several spill-related appeals to wind up in the 5th Circuit.

(Copyright 2013 by The Associated Press. All Rights Reserved.)